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Home prices declined almost 5% in 2011

admin — Fri, 03 Feb 2012 16:11:47 +0000

Smart Real Estate News & Commentary by Chris McLaughlin February 3, 2012

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Home prices declined almost 5% in 2011

Home prices decreased 4.7% in 2011 compared to the year before, marking the fifth consecutive year-end decrease in the CoreLogic home price index. Excluding distressed sales, home prices decreased 0.9% last year, which CoreLogic said gives an indication “of the impact of distressed sales on home prices in 2011.” Home sales last year also show month-over-month declines. December showed the fifth consecutive monthly decline with a drop of 1.4%, but rose 0.2% when distressed sales were removed from the equation.

The December decline followed a much larger drop of 4.3% in November, compared to November 2010. “While overall prices declined by almost 5% in 2011, nondistressed prices showed only a small decrease. Until distressed sales in the market recede, we will see continued downward pressure on prices,” said Mark Fleming, chief economist for CoreLogic. While national statistics may be bleak, a few states posted increases in the price of homes last year. Montana came in first with 4.4% appreciation with distressed sales included, followed by Vermont (+4%), South Dakota (+3.1%), Nebraska (+2.5%) and New York (+1.7%). Illinois had the biggest 2011 decline in prices, 11.3%, followed by Nevada at 10.6%. Nevada’s peak-to-current decrease stands at 60% (including distressed homes), compared with a national decrease of 33.7%.

Employment up

The pace of job creation surged in January, with the US economy generating 243,000 new positions while the unemployment rate dropped to 8.3%, according to government data released today. Both numbers were far better than consensus, which expected a growth of 150,000 jobs and a steady unemployment rate of 8.5%. The overall work week remained unchanged at 34.5 hours while wages rose an average of four cents an hour to $23.29. The closely watched labor-force participation number, which can skew the unemployment rate, fell to 63.7%, the lowest since May 1983. The number of those working part-time for economic reasons rose 1.2%. Job gains have been concentrated primarily in the service sector, particularly in retail and the food and beverage industries. Warehousing, manufacturing, mining and health care also have participated. True to form, services were responsible for 162,000 of the January swell, with manufacturing payrolls growing 50,000. Government cuts subtracted 14,000 from the total. The total number of unemployed fell below 13 million for the first time since February 2009, while the total amount of employed Americans rose to 141.6 million, an increase of 847,000 from December. The unemployment rate was last this low in February 2009. The so-called real unemployment rate, which measures discouraged workers as well and is referred to as the U-6, nudged lower to 15.1%.

Long-term unemployment, though, remains a problem, with the duration dropping from a near-record 40.8 weeks to 40.1 weeks. Also, the level of discouraged workers surged, rising 7% to its highest level since December 2010. Job growth remains one of the two missing pieces of the recovery puzzle, even though the rate has been on a steady trek lower. In December, the economy created 203,000 jobs and the unemployment rate slipped to 8.5%, well off its 10.1% cycle peak. The monthly jobs report generally draws considerable trader reaction, which as of late has been all negative.

Olick – rent vs own riles government policy

“Fannie Mae and Freddie Mac, the mortgage giants under government conservatorship, together owned 182,212 foreclosed properties as of the end of September. While they aggressively market and sell these homes to investors and owner-occupants alike, the numbers are still too high; these number could go far higher, as foreclosures previously stalled by paperwork issues come back into process. That’s why the federal regulator overseeing the two is launching a bulk sale program, offering investors the chance to buy foreclosed properties at a discount, as long as those investors turn the properties into viable rentals for a specified number of years. ‘This rental period could provide relief for local housing markets that continue to be depressed by the volume of foreclosed properties, and provide additional rental options to certain markets,’ according to a release from the regulator, the Federal Housing Finance Agency (FHFA).

The FHFA launched the initial phase of pre-qualification. Investors must prove they have ‘(a) the financial wherewithal to acquire the assets; (b) sufficient experience and knowledge in financial and business matters to analyze and bear the risks of the investment opportunity; and (c) agreement to keep certain information about the REO [Real Estate Owned, i.e. bank owned] and related matters confidential.’ That last part is to keep the prices competitive as the market starts to improve. Giving investors the opportunity to help clear the massive amount of distress in the housing market is crucial. The inventory of foreclosed properties is large, getting larger, and making it impossible for the overall market to achieve price stability. Witness a report today from CoreLogic which shows that home prices in December fell 4.7% year-over-year including sales of distressed properties. Excluding those properties, home prices fell less than one%.

Some, however, think the program is a negative: ‘People are brainwashed to think foreclosures are a bad thing for the housing market. Perhaps four years ago when a million loans all went into default and Foreclosure at the same time but not today. Today, 1st timers and investors — with an insatiable appetite for foreclosures, REO resales, and short sales — are the bedrock of this housing market.’ – Mark Hanson, Mortgage Analyst

‘Foreclosed homes are already meeting strong demand from investors when they come to market. We think these buyers are willing to pay a relatively full price, as they know the specific locations, and a large number of buyers have the ability to bid on the individual homes (doesn’t require significant capital)… Additionally, it will be difficult/expensive for investors to scale up operations given the broad geographic dispersion of properties vs. more traditional rental units, potentially limiting participation.’ – Dan Oppenheim, Credit-Suisse

Oppenheim also asks a valid question as to why the government would offer discounts to large investors buying in bulk, but not to individual investors buying perhaps a single property. There are plenty of Americans out there salivating over incredibly low-priced homes; rental income could be as much of a boon to them as perhaps a tax cut or a refinance. It was interesting yesterday, during his speech touting a proposed new government mortgage refinance program, President Obama, caught up in the moment, exclaimed, ‘No more renting!’ Putting aside the public relations blunder that was, given the fact that the FHFA had announced its REO to rent program not two hours before, it just drove home the conflict our government has between what it thinks Americans want to hear and what our economic reality dictates.

A few simple facts: There is not enough buyer demand to meet the number of homes for sale. A huge number of the homes for sale are empty, foreclosed properties. Too many Americans either cannot afford to buy a home or do not have the credit necessary to finance a home. Too many Americans cannot afford to sell their current homes in order to move or step up to a larger home. Rental demand is therefore strong and getting stronger. While homeownership may be a tenet of the ‘American Dream,’ renting is today’s actuality for a growing number of Americans. Whether it is large investor bulk programs or single investor incentives, adding to rental supply, thereby lowering rents, while at the same time clearing the market of foreclosed properties is a win. It may not be as politically palatable as offering ‘responsible’ borrowers a veiled tax credit in the form of a mortgage refinance, but it is good medicine for what ails housing.”

Pension threat for market investors

It’s no secret that the financial crisis and resulting malaise has taken its toll on bank stocks, commodities and Treasury yields. But it may be have triggered another ripple – one that has gone somewhat unnoticed. Pension funds have become seriously underfunded. According to a recent report from Credit Suisse some of the nation’s largest companies owe their pensions more than 25% of their market cap (after taxes). Although the problem is complex, at its core is simple math. Many firms forecast returns of 8% annually, and that just hasn’t happened. This developing situation is potentially market moving because it could require companies to make larger contributions – much larger. And if contributions ‘do’ go up, the money will have to come from someplace on the balance sheet.

“A pension accounting change at UPS will result in $527 million after tax charge in 2011,” says Joe Terranova. “And Sunoco said they have to contribute $80 million into their pension funds.” In other words, the need to fund pensions could drag down profits and, in turn, share price. In fact, the pension liability at AK Steel was cited by BofA as a reason behind their recent decision to downgrade the stock to ‘Underperform’ from ‘Neutral.” “I think in 2012 it will be a recurring issue,” Terranova says. John Ehrhardt of Milliman confirms the thesis. He tells us that investors should expect record numbers of earnings charges in 2012. “Record low interest rates result in historically high liabilities and the only remaining lever may be employer contributions.” And according to Ehrhardt this may be just the tip of the iceberg. “These companies are going to need 20-30% returns to fill the kinds of gaps we’re talking about.”

WSJ – Ally financial swings to loss

Ally Financial Inc., the US government-owned auto lender, swung to a $250 million net loss in the fourth quarter after taking a charge for regulatory penalties stemming from foreclosure matters. The Detroit-based lender, which provides financing for General Motors Co. and Chrysler Group LLC dealers and customers, continued to make money from its auto-lending operations, but the results were weighed down again by its mortgage unit, which is saddled with lawsuits over foreclosures and soured mortgage investments. The loss compares to a year-ago profit of $79 million. It had a core pretax loss, which reflects results from continuing operations before taxes and other expenses, of $24 million, down from $526 million. Excluding a $270 million foreclosure-related charge, core pretax income would have been $246 million.

“One of our key priorities remains aggressively addressing the risks related to the mortgage business and taking steps to protect the key franchises at Ally,” Michael Carpenter, the company’s chief executive, said in a statement. “This will be critical to advance plans to repay the US taxpayer.” Ally, which was formerly owned by GM, is one of at least five major mortgage servicers in discussions with state and federal regulators over a potential settlement of “robo-signing” and other alleged foreclosure offenses. Regulators are close to finalizing a deal worth as much as $25 billion that could also include Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. On Tuesday, Ally said it would record the $270 million charge in the fourth quarter for penalties from regulators and other government agencies related to foreclosure issues.

The charge was mainly related to its mortgage subsidiary, Residential Capital, which has been the subject of bankruptcy speculation for several months. The charge caused a temporary decline in ResCap’s tangible net worth below $250 million, breaching debt covenants of some of its lenders, Ally said. Ally has been trying to scale back its mortgage operations as it focuses on building up its auto business and online retail bank. In November, the company said it would significantly curtail its correspondent lending operations, which comprise the bulk of its mortgage originations.

See you at the top!
Chris McLaughlin

**************

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

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*************************************************

About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Existing home sales up

admin — Mon, 23 Jan 2012 20:46:22 +0000

Smart Real Estate News & Commentary by Chris McLaughlin January 23, 2012

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Existing home sales up

The National Association of Realtors said Friday that sales increased 5% last month to a seasonally adjusted annual rate of 4.61 million, the best level since January 2011 and the third straight monthly increase. For the year, sales totaled only 4.26 million. While that’s up from 4.19 million the previous year, it’s below the 6 million that economists equate with healthy housing markets. Sales are increasing at a time when the market is flashing other positive signs. Mortgage rates are at record-low levels. Homebuilders have grown slightly less pessimistic because more people are saying they might be open to buying a home this year. And home construction picked up in the final quarter of last year. The median sales price rose 2.3% to $164,500 in December. Still the housing market has a long way to go before it is fully recovered from the housing bust four years ago. In the last four years, home sales have slumped under the weight of foreclosures, tighter credit and falling price. Fewer first-time buyers, who are critical to a housing recovery, are in the market for a home. Purchases by that group fell last month to make up only 31% of sales. That’s down from 35% in November. In healthy markets, first-time buyers make up at least 40%. At the same time, homes at risk of foreclosure made up a third of all sales last month. In healthy markets, they comprise 10% of sales. Investors are increasingly buying homes priced under $100,000. Still, Sales rose across the country in December. They increased on a seasonal basis by more than 10% in the Northeast, 8.3% in the Midwest, 2.9% in the South and 2.6% in the West. The glut of unsold homes declined to 2.38 million homes. At last month’s sales pace, it would take a nearly 7 months to clear those homes. Analysts say a healthy supply can be cleared in about six months.

US and Europe to face more ratings cuts?

The string of sovereign debt downgrades in recent months could be just the beginning. The US, Europe—even Germany—could face further ratings cuts over the next three years, according to a lengthy analysis this week by Citigroup. The European Union got a slight reprieve late Friday as Standard & Poor’s backed it’s triple-A/A-1+ rating on the EU. It had been under review and at risk of a downgrade. The outlook remains “negative.” In announcing its decision, S&P said the EU “benefits from multiple layers of debt-service protection sufficient to offset the current deterioration we see in member states’ creditworthiness.” The US is at the top of Citi’s list for possible downgrades because its debt and deficit troubles are unlikely to be resolved with the political infighting in Washington. Some of the other usual suspects also are on Citi’s list – the European peripheral nations in particular such as Greece and Spain. But even mighty Germany, seen as the continent’s most secure economy, could face a downgrade as the sovereign debt crisis escalates and a European recession spreads through the region. “We expect a string of further ratings downgrades for advanced-economy sovereign debt, and do not expect any ratings upgrades,” Citi analysts Michael Saunders and Mark Schofield wrote. That includes American debt, which Standard & Poor’s downgraded in August in a move that set off a more than 600-point one-day selloff in the Dow industrials.

Citi said it is keeping its outlook unchanged on US debt in the near term but sees trouble looming for the American rating over the next two to three years. Indeed, the list of potential downgrades is ominous and serves as a reminder that while the US equity markets seem conveniently to have forgotten about the world’s debt troubles, some stern and punitive reminders are on the way. Further downgrades for the US, and the initial downgrade for Germany, could be a few years away. But in the next six months, the ratings agencies are likely again to start rattling their sabers, starting with the declaration of a Greek default that is approaching a near-certainty in March. In fact, in the next six months, Citi expects Moody’s to cut ratings for Italy, Spain, Portugal and Greece, with the nascent recovery in Ireland allowing it to be the only one of the “PIIGS” nations to escape the downgrade scalpel. Additionally, France and Austria are deemed likely for a “negative outlook,” while Greece will be placed into either “selective default” or “outright default.” Going out further, the next two to three years are likely to see downgrades not only to the US but also to Japan, France, Italy, Spain, Austria, Belgium, Finland, the Netherlands and Portugal.

DSNews.com – FHA steps up lender requirements
The Federal Housing Administration (FHA) on Friday announced new measures to strengthen standards for the lenders it works with – measures the agency says will help it better manage the risk that comes with insuring mortgages against default. The new regulations institute tighter requirements for lenders authorized to insure mortgages on the agency’s behalf under the Lender Insurance mortgagee program.FHA says these institutions will be required to meet stricter performance standards to obtain and maintain their approval status. More than 80% of all FHA forward mortgages are insured through lenders participating in the Lender Insurance program. FHA’s second mortgagee program – the Direct Endorsement program – requires the agency’s approval for endorsement. In order to be eligible to participate in the FHA single-family programs as a Lender Insurance mortgagee, a lender must be an unconditionally approved Direct Endorsement mortgagee that is high performing. Under the new rule, a Lender Insurance mortgagee must demonstrate a two-year seriously delinquent and claim rate at or below 150% of the aggregate rate for the states in which the lender does business. HUD and FHA will review Lender Insurance mortgagee performance on an ongoing basis to ensure participating lenders continue to meet the program’s eligibility standards. The new rule also establishes a process by which new HUD-approved lenders created through corporate mergers, acquisitions, or reorganizations may be considered for Lender Insurance authority. In addition, FHA has shored up its processes for requiring lenders to cover potential losses from insurance claims paid on mortgages that involve fraud or that are found not to meet the agency’s underwriting guidelines, which could force lenders to buy back more defaulted loans. For those loans insured by Lender Insurance lenders, HUD may require indemnification for “serious and material” violations of FHA origination requirements and for fraud and misrepresentation. In a separate notice to be published soon, FHA plans to propose to reduce the maximum amount allowed for seller concessions, in which the seller contributes a share of the purchase price toward the buyer’s closing costs.

FHA says it will bring the maximum allowable amount to a level more in line with industry norms. The current level exposes FHA to excess risk by creating incentives to inflate appraised value, the agency explained in a press statement. FHA says these measures will help to protect and strengthen its Mutual Mortgage Insurance Fund, which has fallen below the level mandated by Congress, while enabling the agency to continue to fulfill its mission of providing qualified borrowers with access to homeownership. “Taken together, the changes announced today will protect FHA’s insurance fund from unnecessary and inappropriate risks while offering clear guidance to lenders regarding HUD’s underwriting expectations,” said Carol J. Galante, FHA’s acting commissioner. “FHA must continue to strike a balance between managing risks to its insurance funds and ensuring that FHA products are offered as widely as possible to qualified borrowers,” Galante continued. “We hope that the added clarity and certainty provided through these rules will enable lenders to extend financing opportunities to larger numbers of American families.”

Growth but few jobs

The National Association for Business Economics’ industry survey found that two-thirds of respondents expected no change in employment at their companies over the first half of the year. That was the highest share in recent quarters. Although the US jobless rate fell to a near three-year low of 8.5% in December, fewer businesses said they would hire more workers, compared with the previous industry poll. The survey, which was conducted between December 15 2011, and January 5 2012, found that 65% of respondents expect gross domestic product growth to exceed 2% between the fourth quarter of last year and the last quarter of 2012. That was higher than the 1.6% growth rate economists polled by Reuters found. About two-thirds of the companies surveyed said the European debt crisis would have little impact on their sales over the first half the year, while 27% of respondents said they expected to see a decline in sales of 10% or less.

CMBS delinquency rate higher than 9% in 2011

The delinquency rate of loans in commercial mortgage-backed securities (CMBS) bounced higher in December and remained above 9% all year. Delinquency rates were mixed across the five commercial property types in December with hotel and multifamily rates declining while office, retail and industrial rose. Moody’s Investors Service said the rate rose to 9.32% last month from 9.27% in November and from 8.79% a year earlier. The ratings agency said there were $3.7 billion of newly delinquent loans in December, including Bank of America Plaza in Atlanta, while $3.5 billion were resolved or worked out. The $1.4 billion of new CMBS deals was more than offset by $5.5 billion of seasoned loan dispositions and payoffs, pushing the CMBS universe to $582.8 billion, analysts said. The $363 million loan that went into arrears in Atlanta is the seventh largest delinquent loan overall, according to Moody’s. The delinquent rate in the hotel sector fell to 12.96% from 13.54% a month earlier, while multifamily declined to 14.44% from 14.88%, which remains the highest rate among the core asset classes, Moody’s said. Retail delinquencies rose to 7.22% from 6.97% in November; industrial climbed to 12.09% from 11.5%; and office increased to 8.65% from 8.39%. Moody’s specially serviced loan tracker fell to 11.97% in December from 12.1% the prior month.

See you at the top!
Chris McLaughlin

**************

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Orlando short sales 12% higher price

admin — Tue, 17 Jan 2012 18:58:05 +0000

Smart Real Estate News & Commentary by Chris McLaughlin January 17, 2012

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Orlando short sales 12% higher price

The median price of homes sold in Orlando during December 2011 ($118,000) was 12.38 percent higher than the median price in December 2010 ($105,000). During 2011, Orlando’s median price climbed 24.34 percent from a low of $94,900 in January to a high of $118,000 in December. The median price of “normal” sales that closed in December 2011 was $159,900 (representing a decrease of 0.06 percent compared to December 2010). The median price for short sales in December 2011 was $105,000 (an increase of 10.53 percent compared to December 2010), and the median price for bank-owned sales in December was $80,000 (an increase of 6.67 percent compared to December 2010). Orlando Regional Realtor Association (ORRA) members participated in 13.86 percent less home sales in December of this year than in December of 2010: 2,125 and 2,467, respectively. At year’s end, the number of sales for all of 2011 (27,703) was 3.48 less than in all of 2010 (28,701).

In month-over-month comparisons, sales of foreclosed homes declined 56.29 percent in December 2011 compared to December 2010. Short sales and “normal” sales both increased (by 24.41 percent and 14.15 percent, respectively) in December 2011 compared to December 2010. Normal sales (871) accounted for 40.99 percent of all transactions in December 2011, while short sales (785) accounted for 36.94 percent and bank-owned sales (469) made up the remaining 22.07. The Orlando average interest has dropped to a new low once again. Buyers who purchased an Orlando area home in December paid an average interest rate of 3.99 percent, which is the lowest since the ORRA began tracking the statistic in January of 1995. Homes of all types spent an average of 103 days on the market before coming under contract in December 2011, and the average home sold for 92.40 percent of its listing price. In December 2010 those numbers were 97 days and 94.45 percent, respectively.

New York’s factory index up

The New York Fed’s “Empire State” general business conditions index rose to 13.48 from a revised 8.19 in December, topping economists’ expectations of 11.0. It was the highest level since April 2011. New orders climbed to 13.70 from a revised 5.99, while inventories also gained to 6.59 from minus 3.49. The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions. Employment gauges showed strength. The index for the number of employees rose to 12.09 from 2.33 and the average employee workweek index climbed to 6.59 from minus 2.33. Manufacturers were also more optimistic about their outlook with the index of business conditions six months ahead rising to its highest level since last January at 54.87 from 45.61.

More failed HAMP trials

Mortgage servicers are putting more failed Home Affordable Modification Program (HAMP) trials through foreclosure than they were one year ago. According to Treasury Department data released last week, 10.6% of the more that 615,000 canceled HAMP trials completed the foreclosure process as of Nov. 1. That’s more than double the 4.4% of failed HAMP trials foreclosed on as of November 2010. While foreclosures are increasing, alternative modifications on these loans are dropping. Of the canceled HAMP trials, 39.7% went through the bank’s own private programs, down from 45.4% over the same time period, according to Treasury data. Foreclosure completions as a percentage of borrowers never accepted into HAMP trials are lower but still increasing as well. Of the 1.8 million borrowers denied a HAMP trial, 7.6% completed the foreclosure process as of Nov. 1, up from 5% one year before. Roughly 26.5% of these borrowers received alternative modifications, which held flat over the last year.

The increase in more foreclosure completions on failed HAMP trials occurred at nearly every large servicing shop participating in the program. Citigroup saw the highest jump. Of the 71,808 HAMP trials it canceled, roughly 13.5% completed the foreclosure process as of Nov. 1, up from 3.1% one year ago. At Ally Financial, the percentage increased to 12.8% from 6.4% over the same period. At JPMorgan Chase, the increase went to 11.3% from 6.2%. And at Bank of America, the largest servicer in the program, 9.3% of failed HAMP trials went through foreclosure compared to just 1.9% the year before. The highest percentage is currently held by OneWest Bank. It foreclosed on more than 19% of its roughly 20,000 failed HAMP trials, up from 10% last year. Interestingly, Wells Fargo has one of the lowest percentages of completed foreclosures on these mods at 6.7%, almost the exact same percentage one year before.

According to the Office of the Comptroller of the Currency, 17% of the 108,000 HAMP modifications began in the second quarter of 2010 went 60 or more days delinquent within one year. That’s compared to a 31% redefault rate for other private programs. D. Corwyn Jackson, whose company The Corwyn Group helps to train housing counselors for foreclosure prevention, said servicers are getting mixed signals from the government-sponsored enterprises Fannie Mae, which administers HAMP, Freddie Mac and other stakeholders across the country. “The servicers are mandated to stick to the agreed upon foreclosure time lines by state,” Jackson said. “But other stakeholders such as nonprofit housing counseling agencies across the nation are requesting servicers during the negotiation to exhaust their loan workout options before starting the foreclosure process.”

The GSEs charge servicers for taking too long to complete the foreclosure process under specific, state-by-state guidelines. Servicers are expected to still consider the borrower for the GSE programs, but time is of the essence. BofA, for example had to pay Fannie and Freddie $1.3 billion in foreclosure delay penalties in the first nine months of 2011. GSE policies and the failed HAMP trial foreclosure rates is beginning to show in the overall economy. Over the same time period covered by the Treasury data, the shadow inventory of homes in foreclosure or on the verge it has been declining. According to CoreLogic, roughly 1.6 million homes sit in this inventory, down from 2.1 million in November 2010.

DOJ steps up ratings probe

The Justice Department (DOJ) has stepped up its investigation of Standard & Poor’s (S&P) mortgage bond ratings during the financial crisis, the Wall Street Journal reported today. At least five former S&P analysts have been contacted by federal prosecutors in recent weeks, after some had not heard from investigators for more than six months, the newspaper said. The McGraw-Hill Cos Inc unit disclosed in September it had received a Wells notice from the Securities and Exchange Commission indicating it could face civil charges for its ratings of a 2007 mortgage bond deal called Delphinus 2007-1. It has not yet disclosed any investigation by the DOJ, which the WSJ reported is a civil probe. Prosecutors are examining whether S&P managers pushed to weaken standards the company had set for rating the mortgage deals, and whether the company followed its established criteria in assigning ratings. The recent interviews lasted two to three hours, and the former employees were told they would likely by contacted again, the Wall Street Journal said.

DSNews.com – vacant foreclosures cost money

A recent study from the Government Accountability Office (GAO) found that non-seasonal vacant properties across the United States rose 51 percent over the span of a decade, from nearly 7 million in 2000 to 10 million in April 2010. Ten states saw vacancies go up by 70 percent or more as a result of high foreclosure rates. Those with the largest increases over the last decade were Nevada (126 percent), Minnesota (100 percent), New Hampshire (99 percent), Arizona (92 percent), and Florida (90 percent). Georgia, Michigan, Colorado, Rhode Island, and Massachusetts also experienced increases above 70 percent. The elevated number of vacant homes carries with it a hefty price tag for lenders that must resume ownership after foreclosure. GAO found that in 2010, Fannie Mae and Freddie Mac reimbursed servicers and vendors over $953 million for property maintenance costs. However, it’s local governments, many of which are already dealing with depleted funds, that are feeling “significant” pressures from the rise in home vacancies, according to GAO.

The agency notes that other studies have concluded vacant foreclosed properties may reduce prices of nearby homes by as much as $17,000 per property. As a result, municipalities report being out millions of dollars in lost tax revenues. That’s in addition to extra expenditures to put staff, systems, and programs in place to ensure local property ordinances are met, as well as costs associated with addressing public safety issues posed by extended periods of vacancy or improper property maintenance. GAO says the localities it studied are all engaged in multiple strategies to try to minimize the costs and other negative impacts that vacant properties create for their communities.

Efforts range from simple data-gathering to more precisely identifying vacant properties, to acquisition and rehabilitation or, in some cases, demolition of abandoned properties. In addition, some local governments have tasked servicers with additional responsibilities for maintaining properties, amended their code enforcement rules to establish greater incentives for property maintenance, and established specialized housing courts to address vacant property and other housing issues. These strategies, however, face various challenges, particularly the lack of financial support to effectively address such a large-scale problem, according to GAO. As a result, governments in many of the communities GAO examined are reaching out to members of the community – including neighborhood groups and private developers – in an attempt to leverage all available resources. In addition, local governments have called for increased federal funding and greater attention by federal regulators to servicers’ role in managing vacant properties.

See you at the top!
Chris McLaughlin

**************

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Summer home sales up

admin — Thu, 08 Sep 2011 17:42:37 +0000

Smart Real Estate News & Commentary by Chris McLaughlin September 8, 2011

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Summer home sales up

Clear Capital said home prices rose 4% in the second quarter, but the real estate data firm warns rocky times lie ahead. Still, gains made in the summer are likely to be short-lived with consumer confidence weakening toward the end of the summer. “Although the summer gains appear to signal strong growth in home prices, it’s important to keep in mind that these gains are off of the record lows of winter,” said Alex Villacorta, director of research and analytics at Clear Capital. “With summer coming to a close and the price gains clearly starting to level off, the market is at a critical juncture as to whether it can avoid another significant downturn into the slower buying seasons of fall and winter.”

Clear Capital said the Midwest experienced the highest home price gain of 7.3% in the most recent quarter. The Northeast and South followed with price growth of 4.9% and 3.5%, respectively. Price gains in the West were more limited, landing in the 0.7% range on a quarter-over-quarter basis. Jacksonville, Fla., replaced Detroit as the worst performing market, with second-quarter home prices dropping 2.7% in the Florida city from the prior quarter. Clear Capital remains concerned about lagging consumer confidence. “The latest readings on consumer confidence paint an ominous picture that at present, consumers are still not ready to risk jumping into the market despite very low mortgage rates and very affordable home prices,” said Villacorta.

Unemployment up, trade down

The Labor Department says weekly applications for unemployment benefits rose 2,000 to a seasonally adjusted 414,000. The report suggests companies aren’t significantly increasing layoffs, despite weak economic growth. But it also signals that little hiring is taking place. Applications need to fall below 375,000 to indicate sustainable job growth. They haven’t been below that level since February. The four-week average, a less volatile measure, increased for the third straight week to 414,750.

At the same time, the trade gap totaled $44.8 billion, 13.1% less than in June and well below a consensus forecast of $51.0 billion from Wall Street analysts surveyed before the report. It was the biggest month-to-month percentage drop in the deficit since February 2009. US exports rose 3.6% to a record $178.0 billion, driven by record shipments to countries in South and Central America and higher demand from China and major oil producers. Records were also set for two large categories, goods and services, as well as for capital goods and autos.

Olick – why no refi?

“The latest weekly mortgage application survey released today by the Mortgage Bankers Association makes no sense. Mortgage applications fell 4.9% overall, with applications to purchase a home essentially flat and applications to refinance down 6.3%. The part that doesn’t make sense is that refi’s have fallen for the second straight week, at the same time that mortgage rates have fallen for the second straight week. Lower rates usually spur more refi’s, not fewer. The reason we’re not seeing a surge is that most people who qualified for refi’s, already did when rates went below 5%. Now rates flirt around the 4.25% area, dipping momentarily, but not long enough for borrowers to pull the trigger and get the biggest benefit. Despite sudden drops in the 10 year Treasury yield, lenders are not rushing to offer super low rates because they don’t want a flood of refi’s and because they get enough business at 4.25%. Right now, without much competition from their peers, lenders don’t see it as cost effective to lower rates.

Then there is of course the underwriting issue. A lot of folks simply don’t qualify for these low low rates, so the pool of potential applicants is limited. ‘Millions of households are missing out on the mortgage bargain of a lifetime because they do not have the credit score or down payment required to qualify for a new loan,’ writes Paul Dales at Capital Economics. This is not to say that we haven’t seen a huge volume of refinancing over the past year. Refi’s rose nearly 43% month to month in August and have risen 90% since April, according to Capital Economics. ‘At first glance that looks impressive,’ writes Dales. ‘But given just how far mortgage rates have fallen, it is not a great return.’ Mortgage rates are down nearly a full percentage point from February.

So how do we get more Americans into lower mortgage rates? Most expect President Obama to announce some kind of refinance plan during his big speech about the economy tomorrow. The running bet is that it will be some permutation of the Home Affordable Refinance Program (HARP) that allows borrowers with Fannie Mae or Freddie Mac loans, who are underwater by as much as 25%, to refinance to lower rates. So far this program has processed 838,000 loans, according to MF Global’s Jaret Seiberg. Seiberg estimates that with a few tweaks, they could add twice as many borrowers, but those tweaks will be complicated. First you have to lower the fees, which would hit Fannie and Freddie’s bank accounts. ‘FHFA [overseer of Fannie and Freddie] would need to conclude that the value from the reduced probability of default from the refinancing exceeds the lost revenue from the lower fees,’ notes Seiberg. The thought is that they would also expand the Loan to Value Ratio’s (LTV’s), but Seiberg notes that of the HARP refi’s already done, relatively few had LTV’s over 105% anyway. ‘We believe lenders are reluctant to HARP a loan if they fear the borrower is so underwater that they might default anyway,’ says Seiberg.

So could the plan eliminate underwriting on these refi’s, since the borrowers would have to be current regardless, and a current borrower doesn’t need to be underwritten and re-qualified if they are already paying a higher rate? ‘If somebody is current on their mortgage and hasn’t missed any payments in the last three years, does it make any difference if you re-equalify them?’ asks Guy Cecala of Inside Mortgage Finance. ‘If they’re not in trouble now, and they happen to default in six months, regardless of whether you refi them you’re still facing a loss if you’re Fannie and Freddie. Theoretically they’re less of a risk to you if they have lower mortgage payments.’ But a wide-open plan like that could be far too tricky to implement because there’s just not enough infrastructure in place to handle the volume. Regardless, all this refinancing, if it were to happen, in some form or another, would not help the housing market to recover; it might juice the economy a little, putting more spending dollars into our pockets, but it would do nothing to help people in trouble on their mortgages and nothing to spur home buying.”

Obama’s likely jobs plan

President Barack Obama will unveil a jobs package today, and it’s expected to total more than $300 billion, according to US media reports. Here are elements likely to be part of the speech:

- Extending a payroll tax cut for workers first enacted last December. Continuing the tax cut by another year would cost about $112 billion, according to the non-partisan Congressional Budget Office. Congressional Republicans are lukewarm on the idea, some saying the White House should focus on measures such as broad tax reform that would have a more lasting impact.

- Public-works projects, such as the repair of highways and school buildings. Republicans contend large-scale spending initiatives have not helped the economy and point as evidence to the economy’s weakness despite the $800 billion stimulus package Obama and his fellow Democrats enacted in 2009.

- Propose federal help to states to prevent layoffs of teachers and first responders.

- Extending the payroll tax cut to employers.

- Extending unemployment aid.

- A training program targeted toward those who have been unemployed six months or more.

- A mortgage relief program.

Obama’s likely mortgage plan

Obama’s speech could include a nod to efforts to strengthen the housing market by allowing more homeowners to refinance at the current low interest rates, according to sources familiar with the matter. The refinancing initiative under consideration would broaden eligibility for refinancing for homeowners whose mortgages are backed by Fannie Mae, Freddie Mac and the Federal Housing Administration. Republicans would likely oppose plans for broader refinancings that involve taxpayer subsidies; either directly from the government or through Fannie Mae and Freddie Mac but the administration might be able to take executive action on some aspects of the plan.

Changes involving the mortgage giants would require approval by their regulator. The direct jobs impact from homeowner help is expected to be less significant than the potential improvement in consumer sentiment. Any extra spending from reduced mortgage costs could lead to increased hiring, though that could take months and may not happen at all if households choose to save instead.

See you at the top!
Chris McLaughlin

**************

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

MBA – mortgage applications up

admin — Wed, 03 Aug 2011 15:52:41 +0000

Smart Real Estate News & Commentary by Chris McLaughlin August 3, 2011

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MBA – mortgage applications up

Mortgage applications increased 7.1% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 29, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 7.1% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 7.0% compared with the previous week. The Refinance Index increased 7.8% from the previous week. The seasonally adjusted Purchase Index increased 5.1% from one week earlier. The unadjusted Purchase Index increased 5.2% compared with the previous week and was 5.9% higher than the same week one year ago.

“Treasury rates plummeted more than 20 basis points last week as all eyes were focused on the debt ceiling negotiations in Washington, and economic data depicted much slower than anticipated economic growth,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Mortgage rates fell, with the rate on 15-year mortgages reaching a new low in our survey. Refinance application volume increased, but even though 30-year mortgage rates are back below 4.5%, the refinance index is still almost 30% below last year’s level. Factors such as negative equity and a weak job market continue to constrain borrowers. Purchase activity increased off of a low base, returning to levels of one month ago, but remains weak by historical standards.”

The four week moving average for the seasonally adjusted Market Index is up 2.8%. The four week moving average is down 0.4% for the seasonally adjusted Purchase Index, while this average is up 4.2% for the Refinance Index. The refinance share of mortgage activity increased to 70.1% of total applications from 69.6% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.6% from 6.1% of total applications from the previous week.

Moody’s keeps AAA rating

Credit rating agency Moody’s said yesterday that the United States will keep its sterling AAA credit rating for the time being, but is lowered its outlook on US. debt to “negative.” A “negative outlook” indicates the possibility that Moody’s would downgrade the country’s sovereign credit rating within a year or two. The second round of spending cuts included in the debt ceiling deal need to be enacted, Moody’s said, while expressing skepticism about the effectiveness of the so-called trigger mechanism. “Should the new mechanism put in place by the Budget Control Act prove ineffective, this could affect the rating negatively,” Moody’s said in a statement. And the United States should lower its debt-to-GDP ratio. Moody’s said it expects to see debt stabilize at 73% of GDP by the middle of the decade and then decline. And interest rates must remain under control. If borrowing costs for the US. government spike beyond expectations, that would “also be negative” for the rating. S&P has yet to weigh in on the debt ceiling deal.

Refinancing underwater

While hundreds of thousands of mortgage borrowers have been able to squat in their homes without making a single mortgage payment in months or even years, many responsible homeowners who have good credit and consistently meet their monthly obligations haven’t been able to refinance in order to avoid losing their homes. Many of today’s homeowners purchased their homes during a time of easy credit, when mortgage products, like interest-only loans and option adjustable-rate mortgages were issued to the marginally qualified. And many were told that — if they made their payments faithfully — they could easily refinance out of these products into affordable fixed-rate loans once the payments started to balloon. But that day has never come for some borrowers — no matter how good their payment record or credit score. Many lenders are refusing to refinance underwater mortgages — loans that are higher than the value of the home — because it would mean big losses for them if the borrower defaults, said Mark Zandi, chief economist for Moody’s Analytics. According to data submitted to federal regulators and analyzed by the Wall Street Journal, nearly 27% of mortgage applicants were denied mortgages in 2010, up from 23.5% a year earlier.

Jobs up, layoffs up

Two separate reports say private sector payrolls rose at a faster pace than expected in July, but a surprising increase in layoffs in the sector helped push the number of announced US. jobs cuts to a 16-month high. The data come ahead of Friday’s closely watched July jobs report, which is expected to show 85,000 nonfarm payrolls and a 9.2% unemployment rate. It is further bad news for the US., which teetered on the brink of defaulting on its debt repayments before finally rubberstamping a deal to raise the debt ceiling and cut public spending by more than $1 trillion. The pace of private sector job growth slowed in July with employers adding 114,000 positions, a report by a payroll processor showed. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 100,000 jobs. June’s private payrolls were revised down to an increase of 145,000 from the previously reported 157,000.

According to a report from consultants Challenger, Gray & Christmas Inc., employers announced 66,414 planned job cuts last month, up 60.3% from 41,432 in June. The job cuts were up 60% from June, and 59% higher than the 41,676 layoffs recorded in July 2010. It was the largest monthly total since March 2010, and the first month this year that the government was not the biggest job cutter. “What may be most worrisome about the July surge is that the heaviest layoffs occurred in industries that, until now, have enjoyed relatively low job-cut levels,” John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. Layoffs in the pharmaceutical and retail sectors overtook nonprofit and government job cuts last month, accounting for 20.32% and 16.93% of announcements, respectively.

Olick – changes to mortgage servicing coming

“Robo-signing, lost paperwork and wrongful evictions have put mortgage servicers under the gun. Banking Committee Chairman Tim Johnson on Tuesday blamed servicers, in part, for stalling a housing recovery: ‘Homes that should move through the foreclosure process are held up because courts and servicers are concerned that paperwork has not been completed properly.’ To address the problem, lawmakers are considering a national standard for mortgage servicers. The four largest — Bank of America, JPMorgan Chase, Wells Fargo and Ally Financial — have 60% of the servicing market. The industry is urging caution. Servicers are already subject to a slew of new servicing rules from bank regulators, the FHA, Fannie Mae and Freddie Mac. And more could be on the way, as banks are in settlement talks with states attorneys’ generals.

Faith Schwartz, who heads up the industry-led Hope Now Alliance, says ‘it is important to understand the wide variety of rules and initiatives already in progress.’ One rule creates a single point of contact. While it may sound simple, Schwartz describes companies having to complete intensive retraining of employees, so they can answer all consumer questions, instead of passing them from department to department. That has been a huge frustration for borrowers.

Dissatisfaction with the industry has grown in the last year, according to consumer-opinion surveyor JP Power. Much of it comes from borrowers who would like to refinance but can’t because falling home prices have left them without enough equity in the property or they can’t meet today’s tougher credit requirements. Credit unions, independent and community banking groups want an exemption from a national standard, saying they were not part of the problem. Jack Hopkins, who is CEO of CorTrust Bank in Sioux Falls, SD, says his bank competes for loans by keeping the loans in-house, but to comply with rigid and over-prescriptive new rules could force them to exit the servicing business.” [Diana Olick is off today. This post was written by Stephanie Dhue, CNBC Real Estate Producer.]

CMBS delinquencies hit record high

The delinquency rate on commercial mortgage-backed securities (CMBS) spiked 51 basis points in July to an all-time high of 9.88%, according to analytics provider Trepp. The new record comes after two consecutive monthly drops, a first for the market since 2008. Spreads on new deals were tightening, new issuance reached the market and special servicers modified more loans this spring as CMBS 2.0 began to take shape. This all changed in June. Spreads widened and new issuers became tentative, Trepp analysts said. Then, in July delinquencies returned to new heights. One year ago, the delinquency rate was more than a percentage point lower at 8.71%. “Much of the positive momentum that had been surrounding the CMBS market recently has now all but vanished in the past few weeks,” Trepp said.

Analysts pointed to the way special servicers reported new data. Trepp flags a loan as delinquent once it sees a servicer pursuing a foreclosure. There had always been a small percentage of loans that were current but heading toward foreclosure. Trepp said in June, these loans accounted for about 20 bps of the delinquency rate. But in July, servicers decided to assign a “foreclosure” to many more loans that were also on track for modification. After this reclassification, the delinquency rate jumped 46 bps. The percentage of loans in 60-day foreclosure, REO or nonperforming status reached 9.14% in July, up 39 bps from the previous month.

See you at the top!
Chris McLaughlin

**************

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris
* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Foreclosures fall

admin — Thu, 28 Jul 2011 18:49:04 +0000

Smart Real Estate News & Commentary by Chris McLaughlin July 28, 2011

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Foreclosures fall

Foreclosures declined in more than 84% of U.S. metro areas during the first half of the year, according to the latest report from RealtyTrac, an online marketer of foreclosed properties. But that doesn’t mean these markets are staging a turnaround. “These dramatic decreases indicate the foreclosure pipeline continues to be clogged in many local markets across the country,” said RealtyTrac CEO, James Saccacio, whose firm reported earlier this month that the national foreclosure rate fell 29% over the past 12 months. Much of that backlog, he explained, is due to a glut of already-foreclosed properties that the banks are having a hard time selling and to the slowdown in the processing of foreclosures following the “robo-signing scandal” of 2010. As a result of the scandal, in which the banks were accused of mishandling paperwork and failing to follow proper protocols, banks are being much more careful and many filings have been delayed.

The biggest decline in the number of foreclosures have come in judicial foreclosure states where defaults go through the courts and paperwork is scrutinized by judges. The RealtyTrac metro area report, according to RealtyTrac spokesman Rick Sharga, shows — on a localized level — just how significant the declines have been in some judicial states. Before the scandal, Florida claimed nine of the top 20 metro areas with the highest foreclosure rates during the first half of 2010. This year, there’s only one, Cape Coral, which recorded 52% fewer foreclosures compared with the same period in 2010. Las Vegas — ground zero for mortgage defaults the past few years — continues to get bombarded with the highest rate of foreclosure filings in the land.

Unemployment below 400,000

There were 398,000 initial unemployment claims filed in the week ended July 23, the Labor Department said Thursday. That marks the first time since April 2, that the weekly initial claims number has fallen below 400,000, a level typically associated with payroll growth and a lower unemployment rate. It also beats the 415,000 claims economists surveyed by Briefing.com had expected, and was 24,000 lower than the previous week. The four-week moving average of initial claims –calculated to smooth out volatility — fell by 8,500 to 413,750. Continuing claims — which include people filing for the second week of benefits or more — fell to 3,703,000 in the week ended July 16. That was slightly more than economists’ forecasts for 3,688,000. The current unemployment rate is 9.2%.

Olick – vacant homes will drown recovery

“A real estate source I knew recently told me about a guy he knows in Atlanta who has been hired by several different banks to winterize their REO’s (real estate owned, i.e. the bank-owned foreclosures). The homes are abandoned and empty, and clearly the banks think they’re going to stay that way for a while. The winterizer didn’t want to do an interview, for fear he would lose his clients, the banks, who might not want us all to know about this. A new study by an economist at the Cleveland Federal Reserve finds today’s foreclosures stay vacant far longer than the historical norm. Studying one Ohio county, Stephan Whitaker found, ‘foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure.’ The higher the poverty rate in the area, the longer the property stays vacant. Foreclosed homes obviously lower the value of surrounding homes, but Whitaker says the damage can go on much longer than we might think. ‘The data suggest that foreclosure may permanently scar some homes,’ he writes in his research.

Tomorrow we get the mid-year foreclosure report from RealtyTrac, which, given all the previous monthly reports, will likely show a drop in foreclosure activity overall; that is largely due to processing delays. In recent months bank repossessions, the final stage of foreclosure, have been ramping up, putting more foreclosed properties onto the bloated housing market. The banks know, of course, that the volumes are getting too high. That’s why Bank of America launched programs recently in Cleveland, Chicago and Detroit to demolish some of the most run-down foreclosures in the worst neighborhoods. Interestingly, the Cleveland program is in the same county studied by Stephan Whitaker, Cuyahoga. ‘Unfortunately, many homeowners faced with unemployment, underemployment and other economic hardships have transitioned to alternative housing situations, and in many cases have walked away from their homes, leaving behind vacant and deteriorating properties that can cause neighborhood blight,’ said Rebecca Mairone, national mortgage outreach executive for Bank of America Home Loans in a press release last month. The demolition hasn’t started yet in any of the three cities, as there’s obviously a lot of paperwork involved, but programs like this may become more common, especially in poverty-stricken neighborhoods. Other big banks are considering doing the same.

In June RealtyTrac reported 1.7 million homes in some stage of foreclosure. There are over 6 million homes either in foreclosure or in some stage of mortgage delinquency. Compare that to the annualized rate of existing home sales in June (most not REO sales) of 4.77 million units. This is an enormous supply of housing stock, not even including the supply of newly built homes for sale right now (164,000..I know, a pittance), at a time when consumers have made a major shift toward renting. We talk a lot about home price stabilization, and in nice neighborhoods with little supply, prices are holding steady. Sure, everyone thinks the problems are all out in Arizona and Florida, but the latest wave of foreclosures is widespread; I’m talking about the ones we can attribute to unemployment and the recession, not to subprime lending (which almost sounds old now). Cities like Atlanta, Seattle, Chicago, Minneapolis are all seeing rising foreclosures and rising stock of REOs. In all the numbers, all the monthly reports, all the ever-moving data, I think we often lose sight of basic supply and demand. Supply continues to grow in existing homes, and demand, which demographically speaking should be there, is starving right now for confidence.”

Obama’s healthcare to hit $4.6 Trillion by 2020

The nation’s health care tab is on track to hit $4.6 trillion in 2020, accounting for about $1 of every $5 in the economy, Medicare’s Office of the Actuary estimates in a report out today. How much is that? Including government and private money, health care spending in 2020 will average $13,710 for every man, woman and child. By comparison, U.S. health care spending this year is projected to top $2.7 trillion, or about $8,650 per capita, roughly $1 of $6 in the economy. Most of that spending is for care for the sickest people. Many of the newly insured people under Obama’s health care law will be younger and healthier. As a result, they are expected to use more doctor visits and prescription drugs and relatively less of pricey hospital care. Health care spending will jump by 8% in 2014, when the law’s coverage expansion kicks in. Part of the reason for that optimistic prognosis is that cuts and cost controls in the health care law start to bite down late in the decade. However, the same nonpartisan Medicare experts who produced Thursday’s estimate have previously questioned whether that austerity will be politically sustainable if hospitals and other providers start going out of business as a result. The actuary’s office is responsible for long-range cost estimates. Government, already the dominant player because of Medicare and Medicaid, will become even more involved. By 2020, federal, state and local government health care spending will account for just under half the total tab, up from 45% currently. As the health care law’s coverage expansion takes effect, “health care financing is anticipated to further shift toward governments,” the report said.

WSJ – home sales and prices reflect malaise

Home prices and sales of new homes lost ground in recent months, with real-estate agents and builders saying the debt-ceiling debate in Washington is rattling an already-fragile market. According to the Standard & Poor’s Case-Shiller home price index, released Tuesday, prices for existing homes in 20 major U.S. cities fell 4.5% in May from a year earlier, with declines stretching from coast to coast. Only Washington, D.C., saw a year-over-year increase. Compared with April, prices in May were virtually unchanged on a seasonally adjusted basis. On a month-to-month, seasonally adjusted basis, prices were up in nine cities, led by Washington (up 1.4%) and Boston (up 1.2%). Prices in 11 cities were lower, led by Detroit (down 3.4%) and Tampa (down 1.5%).

Separately, the Census Bureau reported Tuesday that new-home sales fell 1% in June from a month earlier to an annual rate of 312,000 units. That was weaker than many economists were expecting and puts the current sales pace below last year’s total of 323,000 sales, which was the lowest annual total on record. Economists said the housing market continues to be hampered by tight lending standards that are keeping buyers on the sidelines as well as high unemployment—the national rate now stands at 9.2%. The political battle between Republicans and Democrats in Washington over raising the debt ceiling has injected fresh worries to the market. Consumers, wary that borrowing costs could increase, are canceling purchase contracts and delaying making a decision until the situation in Washington is resolved. This is “a new curve ball in the housing market,” said Jason Haber, chief executive of Rubicon Property, a Manhattan-based brokerage. “It just adds uncertainty.”

While sales of new homes fell short of expectations, the report contained a few bright notes. The inventory of homes available for sale declined to 164,000, after seasonal adjustments. That total represents a 6.3-month supply, which is the lowest inventory level on record and shows that builders have worked through much of their excess supply. The median sales price in June for newly constructed single-family homes climbed 7.2% from a year earlier to $235,000. Few industry watchers say they believe the rise reflects price increases by builders. Instead, they say, it likely represents a change in the mix of homes purchased, with more high-end or move-up homes selling. Some builders are optimistic. Eric Lipar, chief executive of LGI Homes, a Houston-based builder of entry-level houses, said he sold 53 homes in June, up from 25 a year earlier. He credits advertising to renters in nearby communities who can own an entry-level home for less than their rent. “It’s going pretty well for us,” he said, “but we’re probably the exception.”

More financing options needed

The housing market could face an onslaught of new foreclosures if policy makers and industry professionals fail to develop more financing options that keep real estate investors active in the market, Amherst Securities Group said in a report yesterday. The problem is twofold, according to the analyst group. On one hand, the market needs to stifle a growing supply of distressed properties by implementing solutions — including principal write downs — that will save homes from distressed inventory pools. The second step is ensuring the market has multiple financing options available to investors who want to buy up the existing streams of distressed and existing real estate. “Rental yields are high enough to entice some amount of private capital, but financing for investor properties would certainly attract more capital and cushion further home price declines,” the agency said in its Amherst Mortgage Insight report.

Amherst Securities believes 10.4 million homes are still at risk of going into default after analyzing the number of loans that are currently classified as non-performing, previously delinquent and underwater. The tightening of underwriting guidelines also is making it more difficult for investors and homebuyers to get into the market to extract the access inventory. “It is increasingly difficult to obtain a mortgage, thus shrinking the pool of qualified applicants,” Amherst wrote. “That shrinkage is a growing problem, which will be further exacerbated by the very narrow QRM (qualified residential mortgage) standards.” In its current form, the proposed qualified-residential mortgage standard gives borrowers who put at least 20% down a chance to be exempted from the credit-risk retention rule, which restricts lending by requiring firms to hold 5% of the risk on securitized loans.

See you at the top!
Chris McLaughlin

**************

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Mortgage applications decrease

admin — Wed, 27 Jul 2011 17:58:42 +0000

Smart Real Estate News & Commentary by Chris McLaughlin July 27, 2011

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Mortgage applications decrease

Mortgage applications decreased 5.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA)Weekly Mortgage Applications Survey for the week ending July 22, 2011. The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4.9% compared with the previous week. The Refinance Index decreased 5.5% from the previous week. The seasonally adjusted Purchase Index decreased 3.8% from one week earlier. The unadjusted Purchase Index decreased 3.4% compared with the previous week and was 2.2% higher than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 0.3%. The four week moving average is down 0.5% for the seasonally adjusted Purchase Index, while this average is down 0.3% for the Refinance Index. The refinance share of mortgage activity decreased to 69.6% of total applications from 70.1% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.8% of total applications from the previous week.

GOP debt bill revisions coming up

House Speaker John Boehner will rewrite his debt ceiling legislation to ensure that it meets his oft-stated pledge to cut spending more than Congress increases the federal borrowing limit after the Congressional Budget Office (CBO) on Tuesday evening estimated that the Budget Control Act of 2011 would reduce deficits by only $851 billion over 10 years. Boehner’s plan — and a competing Democratic bill in the Senate — are the only live bills this week that would increase the debt ceiling by Aug. 2. The ceiling must be raised by then, when the Treasury Department estimates it will no longer be able to pay all its bills without borrowing. A House vote planned for Wednesday was pushed back a day following the CBO report. The CBO said the bulk of deficit savings under Boehner’s original bill — $710 billion — would result from caps on discretionary spending. The other big chunk of savings — $136 billion — would come from reduced interest costs on the debt. The spending caps in Boehner’s bill would result in small savings in the early years, but the savings would grow over time. In addition, the Boehner bill would require that both chambers of Congress vote on a Balanced Budget Amendment but doesn’t require that one be enacted.

Olick – debt and mortgage rates

“As we edge ever closer to D-Day (default day, debt ceiling day, however you choose to see next Tuesday, August 2nd), those of us who live and breathe the housing market are trying to figure out what this will mean to mortgage interest rates. They are currently bouncing around historic lows and have been for some time. Refinances are surging, as the seven people left who haven’t yet refied are scrambling to do so. But are we all worried over nothing? ‘The debt crisis is probably the biggest factor hanging over mortgage rates at the moment,’ says Guy Cecala of Inside Mortgage Finance. ‘Once investors feel there is any uncertainty about the US government’s ability to guaranty its debt, Treasury rates and mortgage rates will start to rise – probably by at least 25-50 basis points.’ That’s the clearest answer I’ve gotten from the many experts we’ve had discussing this on CNBC today. Most just say, ‘We can’t know.’ I’ve been arguing that the debt crisis is not as big a deal as the scheduled drop in the conforming loan limits at Fannie Mae, Freddie Mac and the FHA. Experts say the change from the $729,750 limit in the highest priced markets to $625,000 and the drop back to $417,000 in lower-priced markets will really only affect 5% of homes nationally, but the percentage is far higher in certain local markets. ‘But some FHA borrowers will be pushed towards the Fannie/Freddie market and higher down payments since the FHA loan limits don’t bottom out at $417k (like the GSE limits do),’ reminds Cecala.

While we all worry about what that lowest rate can be and where, the fact is that while the ‘average rate’ on the 30-year fixed is very low, today’s buyers are not all eligible, especially as those rates require big down payments and super-clean credit. ‘Those people are not qualifying for the super low rates now, and 30% of our sales now are to cash buyers, investors and foreigners, anyway,’ notes Shari Olefson of Fowler, White, Boggs, who argues we’re missing the point. ‘The bigger issue with those rates, other than housing and the crisis, is going to be the adjustable rate mortgages. If the rates go up, we are absolutely going to be seeing more defaults and more foreclosures as a result of those adjustable rate mortgages.’ And that’s just what we need, as we are finally now seeing a drop in initial mortgage delinquencies. Given today’s rates, most borrowers with expiring ARMs are actually adjusting to lower rates. And let’s remember that: Rates are historically low, and even a bump up of 50 or even 75 basis points still puts us at very low rates. That’s why, again, we have to look beyond the rate to what the rate effects.

‘A downgrade of US government debt would plausibly raise interest rates, and that would communicate to mortgage rates, but more important would be the effect on confidence and our national spirit, which is so conflicted right now,’ says Robert Shiller of the S&P Case-Shiller home price index. ‘It is harming our sense of confidence that matters more than the direct effects on interest rates.’ Last month 16% of home buyers who signed a contract on an existing home bailed out of that contract before closing. The norm is about a 4% cancellation rate, according to the National Association of Realtors. A real estate agent in Burbank, California says he’s seeing cancellations in the 70% range right now. Is it mortgage rates? Mortgage availability? Appraisals? No, he says. It’s a complete lack of consumer confidence.”

Oops – maybe it’s not so bad

For weeks, President Barack Obama and Treasury Secretary Timothy Geithner have stressed that the US Treasury will run out of room to borrow funds next Tuesday and have warned of dire consequences if Congress does not raise the nation’s $14.3 trillion debt ceiling in time. But Treasury officials have never said when the government will run out of cash to pay the nation’s bills, and the consensus among Wall Street analysts is that the cash won’t run out until about two weeks after the August debt-ceiling drop-dead date. “The first risk of a legitimate default is Aug. 15,” said Ward McCarthy, chief financial economist and managing director at Jefferies & Co. “Cash is not going to be an immediate problem. The debt ceiling space is not going to be an immediate problem.” McCarthy and other Wall Street analysts predict that the Treasury will have enough cash to meet its early-to-mid August obligations, including $23 billion in Social Security payments to the elderly and disabled on Aug. 3. That view lends credence to claims that some Republicans have been making for days now that the US government will be able to keep functioning and paying its bills even if there is no deal by Aug. 2.

Analysts also expect that the US Treasury will be able to roll over the $90 billion in US debt that matures Aug. 4. “In all forecasts, it appears as if they have ample cash to cover their obligations,” said Lou Crandall, chief economist with research firm Wrightson. Wrightson and Jefferies expect the United States would start defaulting on its obligations on Aug. 15, the date the government must pay out $41 billion, including around $30 billion in interest on US debt. Barclays Capital has said Treasury may run out of cash to pay its bills around Aug. 10, when $8.5 billion in Social Security payments are due. A Treasury spokesperson on Tuesday had no comment. Analysts do not expect the credit rating agencies to downgrade US debt if Congress does not raise the limit by Aug. 2 and the government is still able to pay its bills.

WSJ – banks fight over splitting foreclosure tab

US banks trying to negotiate a settlement over the home-foreclosure mess have hit a new hurdle: They are squabbling over how to split the tab. The lack of a deal so far among the nation’s largest home-loan servicers has already depressed bank stocks, and an extended impasse could further spook investors. “As time goes on, banks will lose the PR battle,” said Paul Miller, banking analyst with FBR Capital Markets. The terms of a settlement, he said, are less important than getting it done. “They need to get everything behind them.” As federal and state officials prod banks toward a multibillion-dollar deal to atone for a host of irregularities in foreclosing homes around the US, Wells Fargo & Co. has told government officials it should pay less than Bank of America Corp. or J.P. Morgan Chase & Co., according to people familiar with the situation.

The behind-the-scenes infighting has delayed a resolution and could prolong the months-long uncertainty over the ultimate cost of ending one of the biggest controversies stemming from the financial crisis. Negotiations already have dragged on past the mid-June target set by US officials, despite shareholder pressure on banks to reach a deal. Settlement talks with Bank of America, Wells Fargo, J.P. Morgan, Citigroup and Ally Financial Inc. began in March and include a mix of all 50 state attorneys general, the Treasury Department, Justice Department and Department of Housing and Urban Development. The latest disagreement among banks is a contrast to the largely unified public stance taken by financial firms as they work to put the foreclosure woes behind them. Wells Fargo contends it should be rewarded for having fewer risky or delinquent mortgages than the other two, people familiar with the matter said. Citigroup Inc. also has told regulators the structure of a settlement should reflect differences between financial institutions, claiming it should pay less because of its stronger controls on foreclosure practices, these people said.

Durable goods orders fall in June

Orders for durable goods fell 2.1% last month, with the weakness led by a big drop in orders for commercial aircraft, the Commerce Department reported Wednesday. A number of other categories also showed weakness including autos and auto parts. A key category that tracks business investment plans fell 0.4% in June. The 2.1% decline in June orders came after an even bigger 2.5% drop in April. Orders had risen 1.9% in May. The latest drop was a disappointment to economists who had forecast a slight rise, believing that the disruptions caused by the Japanese natural disasters and the surge in energy prices earlier this year were beginning to wane. The June decline pushed durable goods orders down to $191.98 billion on a seasonally adjusted basis. That is still 29.1% higher than the recession low hit in April 2009, but it is 21.6% below the high set in December 2007 as the recession was beginning.

Demand for commercial aircraft plunged 28.9% while orders for new cars and auto parts fell 1.4%. Total demand for transportation products fell 8.5% as orders for military aircraft were also done. Outside of transportation, orders would have shown a small 0.1% increase. Demand for primary metals such as steel rose 1% but orders for heavy machinery fell 2.3% and demand for computers and related products dropped 0.8%. The category of capital goods excluding aircraft, considered a good proxy for business investment plans, fell for the second time in three months, dropping 0.4% in both June and April. The Federal Reserve reported recently that auto production fell 2% in June, the third straight month of declines for autos. US automakers have had trouble getting component parts out of Japan. Overall industrial production showed a slight 0.2% rise in June. Gains in mining and utilities offset a flat reading for factory output. A closely watched gauge of manufacturing activity grew more strongly in June after a sluggish May. The Institute for Supply Management’s manufacturing index rose to 55.3 last month after a May reading that was the weakest in 20 months. A reading above 50 indicates manufacturing is continuing to expand.

DSNews.com – prices stabilizing?

Median prices for REO and short sale transactions continue to decline and have fallen 10% since 2009, according to a new report from CoreLogic. Distressed sales are taking their toll on market readings of home prices. CoreLogic says when the distress factor is excluded from the equation, home prices are actually beginning to stabilize. In May 2011, the company’s “excluding distressed sales” price index dropped 0.4% from a year ago, compared to a decline of 7.4% for the all-transactions index. Non-distressed median prices for both existing and new homes are back to 2009 levels, according to CoreLogic.

While the distressed property market has been a prominent factor of the current housing cycle, the analysts at CoreLogic believe that prominence may begin to wane somewhat in the months ahead. New foreclosure auction filings have dropped significantly since last October, according to the research firm. At the same time, the industry’s shadow inventory – which is the estimated pending supply of distressed properties – declined to 1.7 million homes in April 2011. That’s down from 1.9 million homes a year ago and down nearly 20% from the shadow inventory peak hit in January 2010. With these two distressed sale drivers narrowing, CoreLogic says such transactions will likely begin to decline late in 2011 and into 2012. Although presently the market share for distressed sales remains high, the company has found that geographical sources of distress are shifting and becoming more dispersed. According to CoreLogic’s report, as of December 2008, four of the top five largest distressed sales markets were all located in California, and the top five markets averaged a distressed sale share of 68%. As of April 2011, only two of the top five markets were in California and CoreLogic says more importantly, the average distressed share in the top five markets dropped to 56%.

CoreLogic’s data show that Detroit (59%) and Las Vegas (58%) led the nation with the highest share of distressed transactions in April. They were followed by Sacramento (57%) and Riverside (54%) in California and Warren, Michigan (51%). While much of the focus on distress surrounds the share of sales, CoreLogic says the price discount for REO properties is an equally important factor. REO price discounts are largest generally outside the markets with the highest share of distressed sales. Miami leads the way with a 62% REO price discount, followed by Chicago (60%), Detroit (60%), St. Louis (60%), and West Palm Beach (58%). CoreLogic also notes in its report that equity – or lack thereof – remains a primary concern for the industry. “Depreciation in home prices during the last four years has reduced home equity by more than half to $6.1 trillion and caused a rapid increase in the number of foreclosures,” CoreLogic said in its report. Nearly 11 million, or 23%, of all residential properties with mortgages were in negative equity at the end of the first quarter of 2011, according to CoreLogic’s assessment. The company says distribution of negative equity is heavily skewed to a small number of states. Nevada had the highest negative equity percentage in Q1 with 63% of all mortgaged properties underwater, followed by Arizona (50%), Florida (46%), Michigan (36%), and California (31%).

Recession here again?

Burt Flickinger, managing director of retail consultancy Strategic Resource Group, said the US has just entered a 500-day retail recession, and before it’s over, the US will see weaker retail sales, more store closures and even additional retailers joining Borders in bankruptcy. Helping to drive the trend is a weak labor market, Flickinger said. Job growth has remained elusive, pushing the unemployment rate to 9.2%. Flickinger also expects more people will be joining the ranks of the unemployed as state and local governments make further cuts to their budgets. The latest consumer confidence report from the Conference Board showed consumer attitudes perked up from the prior month, but it also captured growing fears about jobs. Those fears are likely to curtail spending, especially when you consider the large numbers of households that are living paycheck to paycheck.

Flickinger also cited the long-term unemployed who will stop receiving extended unemployment benefits this year as another contributing factor. Once the checks stop arriving, these people will have even less money than they do now. A recent study by Moody’s Analytics estimated that close to $2 of every $10 that went into American’s wallets last year were payments like jobless benefits, food stamps, Social Security and disability. As the jobless benefits expire, about $37 billion will be drained from the nation’s pocketbooks, according to Moody’s. Couple these trends with sky-rocketing inflation for food and clothing as well as for gasoline prices, which are on the rise again, and you quickly see just how pinched the consumer is.

See you at the top!
Chris McLaughlin

**************

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris
* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Foreclosures fall in Q 1 and 2, but…

admin — Thu, 14 Jul 2011 14:33:18 +0000

Smart Real Estate News & Commentary by Chris McLaughlin July 14, 2011

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Foreclosures fall in Q 1 and 2, but…

According to RealtyTrac, an online marketer of foreclosed properties, foreclosure filings plunged 29% compared with the same period a year ago and were down 25% from the last six months of 2010. Through June 30, 1.2 million U.S. homeowners — or one in every 111 households — received a foreclosure filing. The deceleration in defaults continued as the year wore on with second quarter filings — at 608,235 households — marking the lowest quarterly total since the end of 2007, when the mortgage meltdown began. RealtyTrac’s CEO, James Saccacio, sounded a sour note, however, contending that the drop-off in filings can be traced not to economic improvement or a pick-up in the housing market, but to processing delays brought on by the robo-signing scandal in which it was discovered that bank employees were signing foreclosure documents without following proper protocols. “[That's what is] pushing foreclosures further and further out — we estimate that as many as 1 million foreclosure actions that should have taken place in 2011 will now happen in 2012, or perhaps even later,” Saccacio said. As a result, it will only prolong the housing slump, he said. “It would be nice to report that foreclosure activity is dropping as a result of improvements in the economy or the housing market…unfortunately, with unemployment rates inching back up, consumer confidence weak and home sales and prices continuing to languish, this doesn’t appear to be the case.”

Major servicers froze the foreclosure process late last year and are still in the middle of correcting mishandled documents. The servicers became the focal point of investigations from the 50 state attorneys general and have been forced into compliance with consent orders from regulators. Month-to-month, the process seems to be showing signs of life. In May, foreclosure activity spiked across certain states. And in June, foreclosure filings across the country increased 4% from the month before. But viewed on a quarterly or larger scale, the process continues to drag. The properties that completed the foreclosure process in the second quarter spent 318 days in the system on average, up from a revised 298 days in the first quarter and 277 days in the second quarter of 2010. REO properties that sold in the second quarter spent 178 days on the market from the time they were foreclosed, an uptick from 176 days in the first quarter and 164 days one year ago. In New York, REO properties took an average of 309 days to sell. “Processing and procedural delays are pushing foreclosures further and further out,” Saccaccio said. “This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number.”

Unemployment down, but still above 400,000

There were 405,000 initial jobless claims filed in the week ended July 9, the Labor Department said today. That was down 22,000 from the week before, and lower than the 410,000 claims economists surveyed by Briefing.com had expected. Initial claims would have been slightly lower if not for the ongoing Minnesota government shutdown. The Labor Department noted that as many as 11,500 of the claims filed in the state of Minnesota were a result of state employees filing for benefits. There were fewer layoffs in the auto sector, the result of production scheduling changes as Japan’s automakers come back online in the wake of its massive earthquake, said Sam Bullard, senior economist at Wells Fargo.

The four-week moving average of initial claims, calculated to smooth out volatility, also fell. The average was 423,250, or 3,750 claims less than the week before. But continuing claims — which include people filing for the second week of benefits or more — rose to 3,727,000 in the week ended July 9 — higher than economists’ forecasts for 3,700,000 ongoing claims. The government’s monthly jobs report — the most closely watched indicator of labor market growth — hit a major roadblock last month, as hiring slowed to a crawl and the unemployment rate unexpectedly rose. The economy gained just 18,000 jobs in June, coming in even weaker than the paltry 25,000 jobs added in May.

Olick – mortgage rates a “trade off”

“For those of you worried that the scheduled expiration of higher loan limits at Fannie Mae, Freddie Mac and the FHA will have a negative effect on the housing market by raising the cost of home ownership, you can be rest assured the chairman of the Federal Reserve is fine with it. ‘As far as Fannie Mae and Freddie Mac are concerned, there is a tradeoff there between supporting the higher priced homes and weaning the housing finance system off of unusual limits it was put under during the crisis,’ Ben Bernanke told a Congressional Committee today. ‘I understand the private sector is taking at least a significant number of the jumbo mortgage market but at a higher cost,’ Bernanke said.

There have been numerous and varied contentions about the future state of the mortgage market once loan limits drop from the maximum $729,750 to $625,500. The home builders think it will be catastrophic while some economists and academics say it will have little effect, especially at the FHA. Bernanke admits that jumbo loans will come, ‘at a higher cost,’ but we have to put in perspective what exactly that higher cost will be. Mortgage rates on conforming loans are already near historic lows, hovering around 4.5% on the 30-year fixed. Today’s talk about the potential for QE3 pushed bond yields lower, which in turn keep mortgage rates low. ‘I think as long as the 10 yr [Treasury] remains in the 2.85-3.15% range, the average 30-year mortgage rate will continue to hover around the 4.5-4.6% range,’ says Peter Boockvar at Miller Tabak. ‘Bonds are little changed on the day but off the lows after the auction.’

The bond market doesn’t seem to think the U.S. is really in danger of defaulting on its obligations, so rates should remain steady. If a jumbo rate is higher, even by a full percentage point, it’s still historically pretty low, and buyers looking at a higher-priced home likely expect to pay a higher interest rate already anyway. Rather than worry about conforming loan limits, I think we need to be more concerned about proposed rules surrounding mortgage risk retention by banks and what constitutes a qualified residential mortgage (QRM) which would be exempt from risk retention. Bernanke seems to think 20% down for a QRM is the right course. The mortgage industry, largely, does not.”

More stimulus coming

Federal Reserve Chairman Ben Bernanke told Congress yesterday that a new stimulus program is in the works that will entail additional asset purchases, the clearest indication yet that the central bank is contemplating another round of monetary easing. Bernanke said in prepared remarks that the economy is growing more slowly than expected, and should that continue the central bank stands at the ready with more accommodative measures. “Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation,” he said “However, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate.”

Later, more than one Fed member said he opposed any further easing. “I will not support further monetary accommodation,” Dallas Federal Reserve Bank President Richard Fisher told reporters after a speech at the Rotary Club of Dallas. “I do not personally see the benefit of more monetary accommodation even if the economy weakens further. Because again, there’s so much liquidity out there, what’s the trigger to put it to work?”

Obama will veto bills to cut flailing HAMP, red tape

The White House budget office advised lawmakers not to push forward with a bill that would reduce funding levels for the Consumer Financial Protection Bureau and terminate the Home Affordable Modification Program (HAMP). Obama’s budget team released an advisory, saying the White House is opposed to several sections of House Bill 2434, which attempts to establish 2012 funding levels for government financial agencies. “If the President is presented with a bill that undermines either the Affordable Care Act or the Dodd-Frank Wall Street Reform and Consumer Protection Act through funding limits or other restrictions, or reverses current policies on Cuba, his senior advisers would recommend a veto,” the Office of Management and Budget warned. The President’s budget team says the bill, in its current form, would kill HAMP, ending the program’s ability to help struggling homeowners into loan modifications, while placing overly strict limits on the Consumer Financial Protection Bureau’s budget.

HR 2434 says “during fiscal year 2012, the board of governors of the Federal Reserve may not transfer more than $200 million to the Bureau of Consumer Financial Protection.” In the past, the Fed has said the bureau needs about $500 million in funding. The President’s budget office issued a hard line of attack on H.R. 2434 saying the administration “opposes the alteration of the CFPB’s mandatory funding structure as authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which would compromise the Bureau’s independence.” The bureau goes live July 21, becoming the top cop of the mortgage finance and consumer financial products space. The President’s office says the proposed bill would limit the bureau’s expenditures undercutting “the agencies statutory responsibility to oversee consumer financial products.”

See you at the top!
Chris McLaughlin

**************

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Housing prices slow

admin — Thu, 07 Jul 2011 18:30:44 +0000

Smart Real Estate News & Commentary by Chris McLaughlin July 7, 2011

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Housing prices slow

A survey of 27 economists showed the battered housing market is facing myriad problems and won’t turn around anytime soon. Of the 22 who had specific predictions for the closely watched Case-Shiller home price index, the median forecast was for a 3.9% decline in the second quarter compared to a year earlier, and a 2.9% drop in prices over the course of the full year. Only three economists expect prices to rise this year. The outlook for 2012 is only modestly better — a 2% increase in home values, with six of the economists forecasting another drop in prices next year. Economists are fairly evenly split on what it will take to turn the housing market around. Nearly half were looking for a significant improvement in the labor market to boost housing, while the rest believe it will just take time to work through the inventory of foreclosed homes. One economist, Kevin Giddis, head of fixed income at Morgan Keegan, said he believed it would take further significant declines in home prices in order to set a true bottom for the market. Giddis is forecasting a 4% drop in prices this year. Several others said all of those things need to occur before the housing market can show meaningful improvement.

Job growth up

Payroll processing company ADP said private jobs grew rapidly in June — a figure that was much higher than expected and more than four times higher than the prior month. May’s figures were downwardly revised to 36,000 jobs. Economists were expecting a gain of just 60,000 private sector jobs, according to consensus estimates from Briefing.com. Smaller businesses led the charge in June. Small businesses, defined as those with fewer than 50 workers, added 88,000 jobs in June. Medium-size businesses, defined as those with between 50 and 499 workers, gained 59,000. Larger businesses, with 500 or more workers, added 10,000 jobs last month. ADP’s chief executive, Gary Butler, said in a prepared statement that June’s data “are a significant improvement,” especially given last quarter’s 1.9% GDP growth. “Given such strong employment results despite poor GDP, I am optimistic we will see improving job growth in the second half of the year,” Butler said. The government’s employment figures for June are scheduled for release later today and expected to show that nonfarm payrolls increased 90,000 last month after rising only 54,000 in May.

MBA – commercial/multifamily show turn

The Mortgage Bankers Association (MBA) released its Commercial Real Estate/Multifamily Finance Quarterly Data Book for the first quarter of 2011. First quarter data on the commercial real estate markets show the natural effects of the turn of the real estate cycle. Broader economic indicators were positive in the first quarter, but provided less of a tail wind to commercial real estate markets than they might have. Despite this softness, real estate fundamentals have stabilized and are beginning to show signs of mending. Transaction volumes are picking up, and pricing and loan performance are showing initial signs – inconsistent though they are – of improvement. Any pick-up in economic growth will speed the healing; any slowdown will draw out the cycle.

For most property types, vacancy rates remain elevated, transaction volumes remain muted and property prices remain below their peaks, but the natural ebb and flow of the real estate cycle is beginning to have an effect. Economic growth, coupled with a constriction in new supply in the wake of a real estate downturn, is helping to stabilize and mend the commercial real estate markets. The pace and shape of continued recovery will be driven by the rate of economic growth and by how investors and developers react to the market changes they see and foresee. The Data Book compiles the most up-to-date information on topics of interest to commercial/multifamily real estate finance industry participants and observers including trends in property sales, originations, delinquencies and mortgage debt outstanding.

Unemployment benefit applications down

The number of people who applied for unemployment benefits last week fell to the lowest level in seven weeks. Applications dropped by 14,000 to seasonally adjusted 418,000, although that is still above levels consistent with a healthy economy. Below are the states with the biggest changes in benefit applications. The figures are for the week ending June 25, one week behind the national figures.

States with the largest declines:

- Pennsylvania: Down 4,974, due to fewer layoffs in the transportation, entertainment, and service industries

- Puerto Rico: Down 1,332, no reason given

- North Carolina: Down 1,316, due to fewer layoffs in the stone, clay, glass, concrete and textile industries, and in education

States with the biggest increases:

- New Jersey: Up 6,827, due to layoffs in transportation, warehousing and educational services

- California: Up 5,375, due to layoffs in services

- Massachusetts: Up 3,816, due to layoffs in the transportation, trade and educational services industries

- New York: Up 2,591, due to layoffs in services

- Connecticut: Up 2,097, no reason given

- Oregon: Up 1,236, due to layoffs in educational services

NAR – 7 out of 10 renters see ownership as a priority

According to the 2011 National Housing Pulse Survey released today by the National Association of Realtors®, 72% of renters surveyed said owning a home is a top priority for their future, up from 63% in 2010. Seven in 10 Americans also agreed that buying a home is a good financial decision while almost two-thirds said now is a good time to purchase a home. The annual survey, which measures how affordable housing issues affect consumers, also found that more than three quarters of renters (77%) said they would be less likely to buy a home if they were required to put down a 20% down payment on the home, and a strong majority (71%) believe a 20% down payment requirement could have a negative impact on the housing market.

Over half – 51% – of self-described “working class” home owners as well as younger non-college graduates (51%), African Americans (57%) and Hispanics (50%) who currently own their homes reported that a 20% down payment would have prevented them from becoming home owners. Pulse surveys for the past eight years have consistently reported that having enough money for a down payment and closing costs are top obstacles that make housing unaffordable for Americans. Eighty-two% of respondents cited these as the top obstacle, followed by having confidence in one’s job security. The survey also found respondents were adamantly against eliminating the mortgage interest deduction. Two-thirds of Americans oppose eliminating the tax benefit, while 73% believe eliminating the MID will have a negative impact on the housing market as well as the overall economy.

When asked why home ownership matters to them, respondents cited stability and safety as the top reason. Long-term economic reasons such as building equity followed closely behind. On a local level, respondents said neighbors falling behind on their mortgages and the drop in home values were top concerns. Foreclosures also continue to remain a large concern, with almost half of those surveyed citing the issue as a problem in their area.

Retailers have strong June sales

American consumers that were enticed by warmer weather and deep discounts of up to 80% on summer merchandise went on a buying binge in June, helping many retailers deliver robust revenue gains for what is typically the second-biggest shopping month of the year. Big merchants Target Corp., Costco Wholesale Corp., Limited Brands Inc. as well as teen retailers such as The Buckle were among the companies that posted June results that beat Wall Street estimates. The few stragglers included Destination Maternity Corp. and Bon Ton Stores, which reported declines. The figures are based on revenue at stores opened at least a year. This measure is considered a key indicator of a retailer’s health because it excludes results from stores opened or closed during the year. June is the second most important month on a retailers’ sales calendar behind December. During the month, stores typically clear out summer merchandise to make room for fall goods. But this time, it took deep discounts of up to 80% to get shoppers to buy amid worries about the economy.

Analysts fear that retailers have not quite turned a corner. After all, gas prices are still 35% higher than last year at this time. Moreover, prices in the food aisle remain high and this fall, shoppers will be seeing the price tags of fashion and accessories rise as retailers try to offset higher labor costs in China and soaring prices of raw materials like cotton. Shoppers’ biggest concerns remain a weak job recovery and stagnant wages. These worries sent consumer confidence to a seven-year low in June, according to the Conference Board’s survey released last week. In fact, consumer confidence has never been this low in the 24th month of a recovery, according to David A. Rosenberg, chief economist and investment strategist at the Toronto-based money management firm Gluskin Sheff. Historically at the two-year mark, confidence is at 94, not 58.5, which was recorded by The Conference Board’s June survey.

Olick – refinancing drop not good for the economy

“Does anyone remember when the rate on the 30-year fixed mortgage was up around 8%? I do. Perhaps that’s why it continues to stun me that a tiny shift in our now ultra low rates can have a huge effect on consumer activity, namely refinancing. No question, it is a statement on just how tight and how sensitive our current mortgage market is today. According to the Mortgage Bankers Association’s weekly survey, ‘The Refinance Index decreased 9.2% from the previous week. The Refinance Index has decreased for 3 consecutive weeks, reaching its lowest level since May 6, 2011.’

The mortgage bankers cite a jump (and by jump, I mean more like a hop) in rates on the 30 year from 4.46% to 4.69%. This is the highest rate since mid-May, they note, which I will note was just two months ago. Yes, that’s a pretty large jump, but we are still below 5! The trouble is that there is a very small pool of eligible refinancers right now, because 1) so many have already refinanced at these incredibly low rates, 2) many borrowers are still underwater on their homes, which makes them largely ineligible for super low rates and 3) many borrowers don’t have enough equity or the proper credit score to get into a refi that’s worth the cost. So the refinance share of mortgage applications continues to drop. Why should we care? What we really want is to see purchase applications, because that means people are buying houses, and that number did go up a bit last week although it’s still down for the month of June.

But wait: ‘The increase in the share of homes being bought with cash and the likelihood that the NAR’s (National Association of Realtors) existing home sales data are being overestimated by between 10% and 20% means that the relationship between mortgage applications and total home sales is not as close as it once was,’ said Paul Dales of Capital Economics, who believes sales figures are still historically low. But let’s think for a second about what the economy gains from a refi boom? Consumers save more money, which gives them more money to spend. Saving more also gives consumers more confidence in their financial situation, which helps the economy in varied ways. Refinancing can also help some troubled borrowers avoid defaulting on their loans. I’m not saying I want to see us go back to the days of using our homes as cash machines. I do want to go back to the days when our homes weren’t draining us dry.”

See you at the top!
Chris McLaughlin

**************

http://www.shortsalesriches.com

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About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
In Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Wells Fargo modification outnumber Obama’s 5 to 1

admin — Tue, 05 Jul 2011 14:46:47 +0000

Smart Real Estate News & Commentary by Chris McLaughlin July 5, 2011

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Wells Fargo modification outnumber Obama’s 5 to 1

Wells Fargo completed or started trials on roughly 585,000 mortgage modifications through its private programs since the beginning of 2009, more than five times the 101,000 initiated through the Home Affordable Modification Program (HAMP). HAMP launched in March 2009 but almost immediately drew criticism. Treasury officials admit the more than 3 million modifications initially promised was over estimated. Through May, servicers started roughly 731,000 permanent loan modifications and have been averaging between 25,000 and 30,000 per month this year. According to a recent poll of housing counselors, only 9% of borrowers who entered the program described it as a “positive” experience. Homeowners continually blame servicers for mishandling documentation. Overwhelmed servicers point out many borrowers are simply out of reach. “Avoiding foreclosure is a top priority for us and when customers work with us, we can help seven of every 10 to stay out of foreclosure,” said Teri Schrettenbrunner, senior vice president, Wells Fargo Home Mortgage.

The Treasury points out most of the private programs built since the foreclosure crisis use HAMP as a model. But since mishandled foreclosure and modification processes came to light late last year, new standards were put in place, including a single point of contact that servicers are required to provide throughout the loss-mitigation process. The Treasury began to clamp down on poorly performing servicers — at least to the extent their contracts with these firms allow. In June, the Treasury announced it was withholding HAMP payments from Bank of America, JPMorgan Chase and Wells. Schrettenbrunner said the bank continues to build on its primary contact model it established last summer, and the bank has met with 58,000 borrowers at 31 home preservation workshops. Half of those received a decision on the spot or shortly after the event. Schrettenbrunner said the department continues to “aggressively reach out” to borrowers behind on payments to bridge the communication gap as quickly as possible. “We also continue to aggressively reach out to customers 60 or more days behind on their home loans via mail and telephone in an effort to engage them,” Schrettenbrunner said.

Spending cuts coming

Lawmakers must raise the nation’s $14.3 trillion legal borrowing limit soon. The Treasury Department says that on Aug. 2 it will run out of money to pay the nation’s bills in full and on time. That’s only a few weeks away. So what’s it gonna take? The group of lawmakers who participated in negotiations led by Vice President Joe Biden have already identified more than $1 trillion in budget cuts. Republicans want far more. The $1 trillion in cuts would probably be spread out over the next decade or so, meaning roughly $100 billion less in federal spending each year, although the savings might be larger in later years. Isabel Sawhill, an economist who studies fiscal issues at the Brookings Institution, said the cuts are likely to be focused on non-security discretionary spending, a small section of the budget that includes funding for food inspectors, the FBI and education grants, among many other programs and services people associate with government. The revenue increases won’t make much of a dent, at least not compared to $1 trillion in spending cuts. Ending the tax break for owners of private jets, for instance, would only save a few billion dollars, hardly enough to fund the Food and Drug Administration.

Phoenix home sales up

Sales of previously owned homes in the Phoenix area reached a six-year high in May, as investors rushed the market looking for deals. The area recorded 9,837 home resales in May, up 0.8% from April and 4.9% higher than a year earlier, according to San Diego-based real estate research firm DataQuick. Sales of homes less than $100,000 rose more than 40% from a year ago and accounted for nearly 40% of all May transactions. Even as sales rose, the area’s median price point stayed consistent at $120,000 due to pressure from an influx of distressed property sales, which account for two-thirds of the resale market. The $120,000 median price on all resale homes and condos is down 13.7% from last year, with the median falling year-over-year for 11 consecutive months. The May sales surge continued a trend established in March when Phoenix-area home sales rose 7.3% from the previous year, driven by an increase of absentee buyers. In March, DataQuick reported 10,352 new and resale home and condo sales up 44.3% from February.

Personal bankruptcies down

U.S. consumer bankruptcies fell 8% in the first half of 2011 from the same period last year as households cut debt and the economy recovered, according to data released on Tuesday. The number of U.S. consumer bankruptcy filings fell to 709,303 in the first six months of 2011 from 770,117 last year, according to a report by the American Bankruptcy Institute. For June, consumer bankruptcies were down 5% at 119,768, from 126,270 a year ago, the data showed. “The drop in bankruptcies for the first half of the year shows the continued efforts of consumers to reduce their household debt and the overall pull back in consumer credit,” ABI Executive Director Samuel J. Gerdano said. The report said the U.S. economy has continued its sluggish recovery from the deep 2007-2009 recession. The U.S. unemployment rate at the beginning of 2011 had dropped to 9% from 9.7% at the start of 2010.

See you at the top!
Chris McLaughlin

**************

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

*************************************************

About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com